As sung through the velvety pipes of Napoleon Dynamite’s Kip, “I love technology, but not as much as you, you see.”

Big stock-market indexes (and a lot of large cap ETFs) may soon become even more concentrated in the tech sector than they already are, and more than many investors would prefer. With SpaceX reportedly filing for its initial public offering, another big name will eventually be added to the S&P 500 and other indexes. At a potential $2 trillion valuation target, it could be the sixth-biggest US public company by market cap. And future IPOs for companies like Anthropic and OpenAI will compound that, making a case for investors to further diversify their portfolios or risk increasingly high weightings in tech and artificial intelligence.

“If the [SpaceX] IPO goes through, you’re going to have a lot of ETFs and mutual funds that, because it’s now a publicly traded company, are going to have to buy it,” said Daniel Sotiroff, senior manager research analyst for Morningstar. “There is going to be a lot of buying pressure.”

‘I Reckon You Know a Lot About … Cyberspace?’

That will undoubtedly notch up the tech and AI concentration in big market indexes, and possibly sooner than expected. Standard & Poor’s is reportedly considering a rule change that would fast-track newly public companies’ inclusion in the S&P 500, shortening the timeframe from the existing 12-month period, for example. But where SpaceX and other likely IPO companies end up on the index is a question. “A lot of indexes these days do adjust for float,” Sotiroff said. “They’re only counting the shares that are floated publicly.”

A look at the top-heavy nature of the S&P 500:

• Over 40% of the index was in the top 10 companies by market capitalization last year, per RBC Wealth Management.
• That’s up from less than 29% in 2020 and just under 19% in 2015.
• Historically, the biggest 10 companies represented a mix of industries, but the top 10 is increasingly tied to AI, and all the opportunities and risks that come with the rapidly evolving technology.

Already, the increasing levels of concentration have led to more equal-weight funds appearing on the scene, a way for investors to help diversify their exposure within US stocks. “If you look at the impact of the top 10 names in the S&P 500, their contribution to overall risk in the index has gotten very large,” said Nick Kalivas, head of factor and equity ETF strategy at Invesco, which recently launched its QQQ Equal Weight ETF. “They have become more individually volatile, given the big capex spending, some of the uncertainties that come with AI, and they all very much move in tandem together. There is an unusual level of risk.” SpaceX, despite being an aerospace and communications firm, is also heavily invested in the AI space, thanks to its acquisition earlier this year of Elon Musk’s xAI.

‘Just Listen to Your Heart. That’s What I Do.’ “The diversification premise that made passive index investing so compelling is quietly being hollowed out,” Occams Advisory CEO Anupam Satyasheel said in a statement. “Equal-weight strategies were once considered a niche rebalancing tool. Now they are increasingly looking like a structural necessity.” Still, an inherent issue with equal weight strategies is that companies with poor returns get the same allocations as star performers, said Brian Mulberry, chief market strategist at Zacks Investment Management. “It’s really a moment to be aware of what you’re investing in and why you’re invested in it.”

Some ETFs are going out of style faster than fidget spinners in 2017.

The average lifespan of a liquidated ETF this year is just 1.75 years, far shorter than 3.5 last year and roughly 4.7 in 2024, according to Bloomberg. Wall Street’s impatience comes as more ETFs are hitting the market and shutting down than ever before: 1,000 active ETFs launched last year, skyrocketing from just 584 in 2024. A record 146 active ETFs also closed up shop, per Morningstar data.

“The industry is still in growth mode now, but it feels like it’s getting more business-oriented,” said Eric Balchunas, an ETF analyst at Bloomberg Intelligence.

Trendy and Temporary

Short-term, trading-oriented active ETFs — such as those that use leverage or offer exposure to a very specific corner of the market or a single stock — have exploded in popularity of late, but assets typically aren’t sticky. Only three of those strategies garnered more than $1 billion in assets at the end of the year, and only 40% secured more than $25 million, meaning the area could see more closures, Morningstar reported.

However, closures aren’t something firms should be ashamed of, says Aga Kuplinska, a senior vice president at Tidal Financial Group, a third-party service provider that helps issuers build and manage their ETFs. “When you decide to close, it almost feels like a failure, but it’s really not,” Kuplinska said. “It’s just a way to make sure that capital is put to the most efficient use.”

Still, it’s far from a goal. Kuplinska outlined some of the steps Tidal takes when working with new clients to launch an ETF:

• When a client brings the firm an idea, one of the first things it does is check whether the idea has been developed before, and if so, whether there’s a way to differentiate the new product. “In the ETF market ecosystem … the majority of flows go to the first product,” Kuplinska said. “So we don’t recommend anyone launching a very similar product. If there’s 11 gold funds out there, why would we encourage someone to launch a 12th?”
• They also adopt metrics that the fund should meet to be considered successful, such as how much AUM it has to attract to support itself, and establish a marketing plan.

Then if the fund reaches the 12-, 18- or 24-month mark and it’s still not breaking even, and there aren’t any economic indicators showing that the environment will change, it may be time to consider closure, Kuplinska added.

Extra, Extra: Issuers are typically proactive about closing funds since it hurts their business to run an ETF that isn’t profitable, Kuplinska said. But doing so does require proper planning and a public relations plan since it can attract headlines (guilty).

*Emile Hallez contributed to this report.

Some investors have Marathon Man-level paranoia about the markets.

While most buffer ETFs on the market haven’t had an opportunity to prove themselves, as they often have one-year outcome periods and have operated in a bull market, investors like them anyway (Uncertainty is a powerful selling point.) There were about 150 defined-outcome products on the market at the end of 2022, during which time the S&P 500 slid 19%. Today, there are roughly three times as many, and money has consistently poured into the category.

“We, and the other issuers, are spending time educating advisors and investors about the qualities of these products. That’s resonating really well,” said Charles Champagne, head of ETF strategy at Allianz Investment Management. Last week, that firm launched eight new buffer funds, seven of which use quarterly outcome periods. “We’re seeing a lot of growth into this space, even when the markets are really high.”

Is It Safe?

Buffer ETFs take some uncertainty out of investing, offering varying ranges of protection from losses, while usually capping the potential gains. The biggest buffer fund, the $2.2 billion Innovator Defined Wealth Shield ETF (BALT), was flat for the first three months of 2026, compared with a 4.6% decline on the SPDR S&P 500 ETF Trust (SPY), which is the fund it tracks. That fund has a three-month outcome period.

Some recent developments in the category:

• Goldman Sachs last week closed on its acquisition of Innovator, giving it the biggest footprint in defined-outcome ETFs by number of funds and potentially by assets. Innovator had slightly more assets under management in the category than First Trust as of the end of February, per data from Morningstar Direct.
• The Allianz funds launched April 1 include US equity, growth, small cap and international flavors, with downside protection ranging from 5% to 15% and one product with uncapped upside.
• Investors poured a net $1.4 billion into the products in the first two months of 2026 and $8.7 billion over 12 months, the Morningstar data show. Total assets were $66 billion at the end of February, up from $50 billion a year prior.

Drilling Down: The current environment — marked by worries about the war with Iran, stock market concentration risks and other concerns — is fueling recent demand for buffer ETFs, Champagne said. Investors have been layering some protection into their portfolios with the products, in some cases replacing a portion of their bond holdings. The new funds with shorter outcome periods were designed to meet demand, as investors can “lock in” the protected returns several times a year, he said. “You’re realizing those outcomes faster, and investors tend to like that.”